FATCA at Moodys Gartner Tax Law 1 | Page 30

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Trusts do not have “customers”, if that word is given its traditional meaning; they have beneficiaries. Furthermore, a trust generally cannot be engaged in a business to qualify as such under us tax law. Accordingly, the parenthetical phrase is necessary to ensure that a trust will qualify as an investment entity for us tax purposes. Third, the “managed by” relaxes the customer requirement by providing that trusts are investment entities if they are managed by an entity that is in the business of providing the three enumerated services to customers. Fourth, the Canadian iga does not explain what is meant by “managed by.” The Treasury regulations, however, add some clarity by providing two examples showing that the threshold is not very high. The management component is satisfied—and the trust is an investment entity under the Treasury regulations—if the trustee manages the trust itself or the investment assets of the trust. Mere advice, however, may not constitute management. In summary, if we ignore the reference to fatf, a personal Canadian trust will be classified as an investment entity—and therefore as a financial institution subject to
FATCA—if 1. either a. the trust has a professional trustee or b. the assets of the trust are managed by a professional manager; and 2. the professional trustee or manager is not an individual person. This conclusion is consistent with the guidance notes issued by the United Kingdom
and Ireland regarding FATCA. The UK guidance notes specifically state that trusts are investment entities if they are managed by a financial institution. The Irish guidance notes echo the United Kingdom’s position.